Indiana-based Old National Bank has been accused in a federal lawsuit of redlining in the Indianapolis area by providing disproportionately fewer mortgages to Black borrowers, closing branches in predominantly Black neighborhoods and giving Black people less information during the mortgage-application process.
The Fair Housing Center of Central Indiana, or FHCCI, brought the legal action Thursday after a multiyear investigation of the financial institution and meeting with bank officials. According to the complaint, the officials in private meetings did not deny the allegations of discriminatory lending practices.
“Old National has structured its business to avoid providing access to mortgage credit to Black residents and neighborhoods in the Indianapolis area and to discourage Black residents from seeking mortgage credit,” the FHCCI states in its lawsuit. “Old National deliberately seeks to limits its residential lending business to predominately white area and customers and maintains policies and practices that have the effect doing so.”
Describing the bank’s conduct as redlining, the FHCCI asserts Evansville-based Old National is violating the federal Fair Housing Act.
The complaint was filed in the U.S. District Court for the Southern District of Indiana on Thursday.
“Over the time period reviewed, Old National Bank has been one of the worst performers in making mortgage loans to Black home seekers in Central Indiana,” Amy Nelson, FHCCI’s executive director, said in a statement. “Old National’s peer lenders did a substantially better job at serving the credit needs of Black residents.”
Old National is the largest bank based in Indiana, with more than $23 billion in assets. The financial institution pushed back against FHCCI’s allegations.
“Old National strongly and categorically denies the claims made by the Fair Housing Center of Central Indiana regarding certain of our lending practices,” the bank said in a written statement. “Old National is committed to engaging in fair and equal lending practices. Because this is now the subject of pending litigation, we are unable to comment further at this time.”
The complaint comes as the Indiana bank is preparing to acquire Chicago-based First Midwest Bancorp. Asserting the merger would expand Old National’s footprint greatly and put even more communities at risk of redlining, the FHCCI is asking the Federal Reserve to conduct due diligence to ensure the concerns over fair lending are address before the merger is approved.
In its lawsuit, the FHCCI gives a detailed analysis of Old National’s lending practices in the Indianapolis-Carmel-Anderson Metropolitan Statistical Area.
The geographic area is home to 2 million people, of which 305,000 are Black. Most of the Black residents, 260,000, live in Marion County. During the two-year period from 2019 to 2020, Old National approved more than 2,250 mortgage loans across the entire area but just 37 were made to Black borrowers.
Within Marion County, 3.86% of Old National’s mortgage loans were made to Black customers. Comparatively, 14.73% of peer institutions’ mortgage loans in Marion County for the same two years were made to Black residents.
FHCCI argues if Old National’s failure to make loans to Black borrowers was due to an absence of qualified borrowers, other lenders in the Indianapolis MSA would have similarly low levels of minority lending.
“Old National’s product mix and the much greater success of its peers in making loans to Black customers makes it clear that the reason for Defendant’s abysmal lending record is its deliberate avoidance of Black borrowers and neighborhoods, that is redlining,” FHCCI asserts in its complaint.
In addition, the FHCCI highlights that Old National has closed four branches in Indianapolis that were in Census tracts that were at least 25% Black. Moreover, all four of its mortgage loan officers are located in an office on East 96th Street, away from the neighborhoods where more Black residents live.
The FHCCI conducted two “matched-pair” tests in 2021, having white and Black individuals pose as Indianapolis residents seeking mortgages. The results, FHCCI asserts, further confirmed the bank’s “pattern and practice of redlining.”
According to the complaint, the Old National loan officers provided the Black testers with less information, took them less seriously and steered one of the testers toward more costly mortgage products. Conversely, the loan officers gave the white testers more helpful, detailed product comparisons and analysis of their finances, additional information about loan options and more meaningful follow-up contact.
The FHCCI is asking the Southern Indiana District Court to enter a permanent injunction to stop Old National from continuing to discriminate in mortgage lending. The not-for-profit also wants the court to direct the financial institution take steps to remedy the effects of the redlining.
Law firm RileyCate LLC in Fishers is representing the FHCCI.
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Unfortunately, Old National has exacerbated a problem that has existed for far too long. Qualified buyers, those with the assets and credentials to qualify for what would be considered a prime mortgage are declined. Is one reading this correctly, the paired borrowers test clearly shows that less information and more costly ‘products’ were offered black applicants? Why? What is the justification? And, could loan applications be processed based on qualifications linked to a application number for which the applicant name or other potentially defining personal characteristics would be masked to the application review and underwriters.
This brings to mind the recent new article about appraisals for black-owned homes coming in substantially lower that similar homes owned by whites. When the black owners masked their race for a new appraisal, it came back at a level comparable to those for the similar white-owned homes. There is no logical explanation for this except that discrimination against blacks is alive and well in Indiana.
Old National has been a bad bank for years….
My wife and I left there years ago because my wife was treated not just rudely, but meanly.
Old National is an excellent bank and it’s financial performance proves it. Let the court case go and give them due process. This story assumes that the test provided was not rigged from the beginning, otherwise called entrapment.
An “excellent” bank for whites, right? because it seems the prima facie conclusion is that Old National is stuck in the old ways of doing business.
James, if you are going to use words, at least understand what they mean. No, it is not “entrapment.” Even a “rigged” test (which you suggest without any evidence) would not be entrapment. And, a bank’s financial performance has NOTHING to do with whether or not it has broken the law with respect to lending discrimination.
Let me preface this by saying that I don’t bank with Old National, own their stock or have any opinions about them one way or another. Also, I do not defend racial discrimination in home mortgage loans or in any other aspect of life. With that being said:
Maybe they’re a great place to bank, maybe they’re terrible, as a few other commenters have said, but that’s irrelevant if these allegations are true. But first and foremost, these are allegations, not facts. A lawyer has made a bunch of statements that may or may not be true in a court filing. Not until a jury or a judge has heard evidence from both sides will we have any idea whether any of these statements are true.
Here’s what we don’t know from this story. Who are the so-called “peer institutions” that the FHCCI is comparing them to? If they are Chase, B of A, Wells Fargo, etc., then are those really peers of an Evansville-based bank?
Maybe the “peer institutions” are so big that they can make vastly more loans in Central Indiana, so if a few more of theirs go south, they still make a tidy profit.
Or, maybe the “peer institutions” sell their loans right away to the Fannie Mae & Freddie Mac (in other words, to taxpayer supported institutions), thus getting their loans off their books quicker than Old Nat’l (we don’t know).
The story states that FHCCI conducted two tests in 2021 of people pretending to be in the market for mortgage loans, and found that the mortgage loan officers were “less helpful” to the black testers than to the white testers. Are you kidding me? That’s it?
No detailed information was provided about the parameters of this test, that’s almost all we know. Two tests were run, and from that we are supposed to conclude that everyone working in mortgage lending for Old National in Indianapolis is a racist, or that the bank is run by racists who don’t want African Americans to get home loans?
The story says that FHCCI has been investigating Old National for years, but all they have to show for it is statistics and two measly tests in years (both run this year)? Hmmm, I wonder why, if they’ve been investigating Old Nat’l for years, that they’ve only run their two tests this year, and filed their case this year. Why not last year? Why not in 2019?
Could it maybe, possibly have anything to do with the fact that Old Nat’l is trying to get regulatory approval to merge with an Illinois bank? Could it be that having a discrimination lawsuit pending while those regulators are being asked to approve that merger puts Old Nat’l in an extremely vulnerable position?
If it can be proven that Old National intentionally discriminates against African Americans or anyone else, as a group, then they absolutely should be held accountable in a court of law. But until then, this looks like a shake down to me. And it will be a successful shakedown too, because with this merger pending, Old Nat’l will absolutely not allow this lawsuit to torpedo their deal, so they will be in a hurry to pay FHCCI enough go-away money to drop their lawsuit.
There are a number of things wrong with your lines of questioning. First- A peer institution is any bank operating in the same place, it does not matter the size. This includes Chase/BoA/Wells but also local banks like Bank of Indianapolis, First Merchants, and smaller. I believe First Merchants (based in Muncie) had a similar action against them a few years ago. Where the bank is headquartered does not matter, it is what markets they are operating in, and in this case, that is Indianapolis.
Second, the “statistics” you mention are exactly what proves the crime. If you are comparing banks of different sizes, the demographics of the borrowers should be of relatively equal percentages. If most banks are in the 12-16% range of loans to a demographic, and you are at 4%, then you are not serving that population. Read the numbers again and tell me this is not concerning: 37 of 2,250 loans over a 2 year period were made to black borrowers. That is 1.6%. Pathetic on their part.
Finally, the actions of the bank made this possible. I doubt you read the actual complaint, but the data and branch location maps make it clear, they closed banking locations in predominantly minority locations over a 10 year period. This is the definition of redlining and it clearly caused the desired result.
I agree, the agency is applying this pressure at a critical time for the bank. They are using the leverage they have to actually force change. The bank has been aware of this issue for years and done nothing to help themselves (in fact, they have actively increased the disparity with their location practices), so why would that agency sign off on the merger?
‘Go-away money’. Aren’t you the cynical one. I want to believe that if they are guilty they don’t get to pay someone off to make it go away. I want to hope that other banks take note of this. I want to hope that black and brown people start being treated equally.
Cynthia, that’s my point. Old National will never be “found guilty” (although that’s a criminal law term and this is a civil lawsuit), because they will settle the suit out of court by paying FHCCI off to drop their suit. Hence the term go-away money.
That’s not cynicism, it’s reality. Well over 90% of civil cases never go to trial…many are settled, others are just dismissed. In our litigious society, if every civil case went to trial, we would all die of old age before we got our day in court.
If you want to call me cynical, you could say that I’m cynical because I think this whole lawsuit is nothing but a shake down of a big corporation who happens to have a lot of money on the line right now and is therefore 20 times more likely to pay out a nice chunk of change to make these shysters go away.
And I only say that for two reasons. First, because the worst allegation they could come up with is that the bank employees were supposedly less helpful to a black person, which is obviously a highly subjective opinion. Maybe Old National just gives lousy customer service, which is what several other commenters said.
And second, the lawyers are counting on well meaning people like you who will just assume that if statistics show some difference between how this bank makes loans vs. how say, Chase or B of A or PNC or Huntington makes loans, well, the only possible explanation is that Old National is full of racists who just want to keep African Americans living in slums. I mean come on! In 2021 a large corporation is going to deliberately forego the good publicity of helping African Americans achieve the American dream, and instead put their reputation in jeopardy, for no other reason other than because they just hate black people so much. An Indiana bank no less! So I guess you think Indiana is crawling with racists and gives them high paying jobs in banking too. It couldn’t possibly be for any other reason like say, credit worthiness. Well, I don’t believe that, but hey, you do you.
As I said in my original post, I’m obviously not defending actual racism, and if Old National were to be found liable for the claims in this lawsuit, you bet they should pay! Rather, I’m bemoaning the likelihood that this case will never go to trial, that FHCCI is skilled at targeting companies that are mom likely to pay them off. If FHCCI waives their legal fees in this case, I will owe them a huge apology, but until then, I say this is their racket.
Keith M…”not defending actual racism.” Right. Because there are good people on both sides?
Brent,
Just keep parroting those left wing talking points, it’s so much easier than thinking for yourself.